Economic Nexus

Economic nexus refers to a legal standard that determines when a business is required to collect and remit sales taxes in a state, based on its economic activity rather than physical presence. If a company reaches certain thresholds, such as sales revenue or transaction volume within a state, it establishes a connection, or "nexus," with that state. This means the business must comply with local tax laws even if it has no physical store or office there. Economic nexus aims to ensure fair taxation and is particularly relevant with the rise of online shopping and remote sales.